Councils face 'decades more austerity' as social care set to account for half of town hall revenues

Councils could face "decades more austerity" amid spiralling social care costs unless the Government rethinks a major overhaul of town hall finding, an influential thinktank has warned.

The Institute for Fiscal Studies (IFS) warned that social care could account for half of all taxes raised by local authorities by 2035, with vulnerable elderly people facing patchy access to help for basic tasks such as getting out of bed.

Councils could also be forced to squeeze budgets on other public services such as housing, bin collections and roads to cope with the soaring demand for social care from the ageing population, the IFS said.

It comes after Health Secretary Jeremy Hunt announced plans for a cap on punitive social care costs - shifting away from the unpopular decision to scrap a cap in the Tory election manifesto.

"The Government has to decide whether it thinks adult social care is ultimately a local responsibility, where councils can offer different levels of service, or a national responsibility with common standards across England," said Polly Simpson, the report's co-author.

"If it opts for the latter, it cannot expect a consistent service to be funded by councils' revenues, which are increasingly linked to local capacity to generate council tax and business rates revenues.

"In that case, centralised funding for social care would seem more appropriate, and could allow closer integration with the NHS, which is also centrally funded. But it would make England even more centralised than now, and go against the Government's devolution agenda."

Under current plans, town halls will lose their general grant funding from 20202, leaving them dependent on council tax and business rates to raise cash for public services.

If council tax revenues were to increase by 4.5 per cent a year, then social care spending could eat up half of all the revenues raised by local taxes by 2035, up from the current figure of 30 per cent, the IFS said.

The thinktank suggested the Government could ring-fence grants to top up councils' own tax revenues, although there was no guarantee they would actually be spent on social care as councils could simply cut back the amount of their own money which they allocate.

If ministers wanted to ensure ring-fenced grants were spent in full on social care, then the IFS said the services would have to be fully funded by central government grant.

Labour said the findings should act as a "wakeup call" to ministers over the extent of the "social care crisis".

Shadow social care minister Barbara Keeley said: “The Tories’ decision to abolish grant funding without clear plans for how councils will replace that money is looking increasingly reckless.

“Many councils with the highest demand for social care are the least able to raise money through council tax and business rates. Yet, this Tory Government have no plans in place to make sure that those councils can fulfil their duties to provide adult social care."

Town hall leaders said they were being left with no choice but to make cuts to services - and warned that communities could lose out.

Cllr Claire Kober, Chair of the Local Government Association’s Resources Board, said: “Councils will be asking people to pay similar levels of council tax while at the same time, warning communities that the quality and quantity of services they enjoy could drop.

“The Government must recognise that councils cannot continue without sufficient and sustainable resources. Local government must be able to keep every penny of taxation raised locally to plug funding gaps and pay for the vital local services our communities rely on.”

A Government spokesman said: “We have provided an extra £2bn to support the social care system, and recently announced a further £150m for next year.

“We will shortly outline the Government’s plans to reform social care to ensure it is sustainable for the future in a Green Paper.”